This article is Part 4 in a 4-Part series about business plans.
One resists the invasion of armies; one does not resist the invasion of ideas.
- Victor Hugo
Your investor presentation should contain the historical events explaining how and why your category has changed. These changes should signal why now is the right time for your product or service. Your idea and Cthulhu can't devour the world, unless the stars are right.
The History of Your Category
Your category has changed over time. Companies have added products and services to the market. With each change the market has new demands. People are always looking for products that solve the problems they have. Your job as a founder is to explain why your product solves one problem now being faced.
A founder needs to explain their solution to three different people:
- Potential investors.
- Potential customers.
- Potential business partners.
When pitching potential investors, talk about your category. Explain what historical events have happened, which make now the right time for your product or service. Customers adopt products whose category timing is right.
Not only does the category have to be right, but recent trends should also point to why now is the perfect time for your idea.
Marc Andreesen wrote about why software - a broader category that your idea probably fits in - is eating the world:
Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.
Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.
On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries - without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon's cloud costs about $1,500 a month.
With lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired - the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later.
In this piece, Marc explains why software is trending. You need to explain the trends which positively affect the success of your idea. Recent trends should point to why now - and not before - people are ready for your product.
If previously other's have attempted your product, there will be specific reasons why they failed. Did the product previously fail because the back-end technology wasn't where it needed to be or consumers didn't have access to broadband?
The trends should point to why the market is ready for your idea.
Previous Investors and Founders
You are not special. You are not a beautiful or unique snowflake. You're the same decaying organic matter as everything else.
Your idea is not new, but, every idea has a right time. Recent trends and the history of the category should align for your product's adoption.
Even if you explain why it wasn't the right time before, potential investors may hesitate. They may have financed a previous iteration of your idea. Burned investors and their investment intuition will be sensitive to your idea. But, you can leverage the investor's sensitivity to your advantage.
Find the other founders who have previously attempted your idea. Seek them out. You want to learn from them.
Tell them what you are doing and explain you know they've attempted it before. Ask them if about their idea and product. People love talking about themselves.
Understand the reasons why they failed. What would the unsuccessful founder have done differently? This doesn't necessarily mean the same plan they used won't work this time. When they tried the idea the market may have not been ready. If the failed person has a good reputation, persuade them to join as an advisor.
Talking to people who've failed at your idea will prepare you to answer investors questions. If an investor asks about a previous problem encountered, respond with your solution. Then explain that you've discussed this problem with your advisors. You will impress the investor by doing your homework and by potentially having a person - who has previously attempted your idea - as an advisor.
The Victor Hugo quote I opened with is often paraphrased as:
Nothing is as powerful as an idea whose time has come.
Is now the right time for your idea?
Written: January 21, 2013